Mutual Fund Manager Educational Background and Activeness
20 Pages Posted: 15 Dec 2018
Date Written: May 2, 2018
Some active mutual funds are more active than others. Indeed, research has found that many so-called active funds are not nearly as active as they appear as they hold a portfolio that can be quite similar to their benchmark index. Furthermore it has generally been found that funds who are consistently active (hold a portfolio that is quite different from the benchmark) but take positions that are sufficiently well diversified across industries (do not have high tracking error), have better risk-adjusted performance. Given the importance of an active fund being truly active, in this paper we try to predict a fund’s activeness by examining mutual fund manager educational characteristics. After controlling for many factors including the firm at which the fund is located, we find that funds with managers who attend higher mean SAT undergraduate schools are significantly more active than other managers. We also find evidence that funds with younger managers and funds with managers who have a large ownership stake in the fund also are significantly more active.
Keywords: Active Share, Manager Education, Mutual Funds
JEL Classification: G23
Suggested Citation: Suggested Citation